'Here to stay': But lawsuit and foreclosure cloud Kluge's dreams

On the block: the first homestead in Vineyard Estates, developed by William Moses and Patricia Kluge.
ALBEMARLE COUNTY WEBSITE; LISA PROVENCE

With a looming foreclosure of its only spec house and a $2 million lawsuit against it, Patricia Kluge's Vineyard Estates subdivision seems to be pumping out sour grapes instead of sales.

"If Vineyard Estates breaches the contract, they have to pay the full commission," says Brock Green, attorney for real estate broker Frank Hardy, who alleges in lawsuit that Vineyard Estates breached its listing contracts and now owes nearly $1.9 million in commission his firm would have reaped had it sold all the lots.

Back in 2003, wine-making philanthropists Kluge and husband William Moses envisioned the 511-acre Vineyard Estates as luxury villas in the midst of grapevines and orchards. After their bold concept of interweaving mansions with vineyards fell afoul of neighbors and Albemarle County zoning laws, the couple ended up performing a simpler by-right division of 24 lots. Frank Hardy signed two listing agreements for the million-dollar-plus lots in 2007 that were to expire about a year and a half later.

According to Hardy's suit, filed about a year ago in Albemarle County Circuit Court, his firm "diligently, professionally, and aggressively" pursued leads but met with resistance not only from buyers but from Vineyard Estates. Notably, the suit claims, Hardy was not permitted to enter the properties in the MLS, a searchable system but one sometimes considered too proletarian for upper-echelon estates.

The suit alleges that when Hardy refused to release Vineyard Estates from the contract without compensation for time and expense, Vineyard Estates signed with another brokerage, Sotheby's– the firm responsible for the initial $100 million-dollar listing of Kluge's main residence, the 24,000 square-foot Albemarle House, which was reduced mid-February to a still eye-popping $48 million.

In response to Hardy's suit, Vineyard Estates claims it really had been released from Hardy's contract– and provides an exhibit that seems to support the claim.

"We all agree that we would like to accept your offer of $25,000 together with the release of the existing contract," Hardy wrote in an email to Vineyard Estates representative John Grab on April 25, 2008– about a year before the listing contracts expired. "Would you like to prepare a document which would terminate our agreement upon receipt of funds?"

While Hardy's attorney Brock Green says that email "is only a small part of the story," Vineyard Estates attorney David Thomas says the "email speaks for itself" and notes "lawsuits like this are more common since the real estate market took a downturn."

Regardless, the lawsuit is "bizarre" says one local realtor, who asked not to be named. "I would never sue my clients," says the realtor, noting that the real estate business is "relationship-based" and relies on goodwill and word of mouth.

Realtor Roger Voisinet agrees that suing clients is indeed unusual–- particularly given what he sees as a "generous" settlement offer.

"To be given any compensation is way more than the average seller would do," notes Voisinet, adding that Hardy, whom he respects, "must have given it a lot of thought, and maybe felt that he was much more damaged than $25,000."

Albemarle Circuit Court Judge Cheryl Higgins will rule on Friday, February 26 whether the case will go to trial.

Could it be that there just aren't buyers for such exclusive listings? A year into the new listing agreement with Sotheby's, not a single lot at Vineyard Estates has sold. And making matters worse, the lone spec house now faces the threat of foreclosure.

The house, a 6,600-square-foot mansion at 2621 Coopers Lane, was built in 2007 on 2.895 acres and is assessed for $2.76 million. Buyers hoping to score a bargain should be sure to bring their checkbooks to the 9:30am March 1 auction at the Albemarle courthouse, as a $360,000 deposit is required.

According to county property records, a company called Lehman Rockwell Evans LLC bought an 18.33 percent piece of the house for $712,000 in March 2007. Brian and Debra Helms invested $1 million for a 30 percent share in January 2008.

“Like most real estate projects, it was developed with partners,” says winery spokesperson Kristin Moses Murray. “As a result of the collapse in the real estate market, some of those other partners went bankrupt, and many of the remaining investors abandoned their continuing obligations. In short, they have gone under, and Patricia and Bill have not.”

Only one lot in the subdivision is foreclosed, and Vineyard Estates is a separate holding from other Kluge enterprises, such as the Kluge Winery and Vineyard, stresses spokesperson Murray.

“Because we remain financially viable, we are in the process of consolidating all ownership back with us,” Kluge and Moses say in a prepared statement, “and pursuing discussions with stronger partners who both understand the potential of these 24 lots and have the resources to help us realize it.”

But with so much property for sale, including gourmet gas-bistro Fuel, on the market since mid-2007, are all the for-sale signs indicative of cash-flow woes or merely downsizing, which has been the official company line since Albemarle House was listed with Sotheby’s in October?

“You’ll never hear the D-word out of my mouth,” says Murray. “But they are streamlining their lifestyle.”

Murray points to a Sotheby’s release: “Her future plans include creating a new home on the vineyard property, which will be built and decorated in a style entirely different from Albemarle House, reflecting her changing taste and more streamlined lifestyle.”

Indeed. Kluge plans to start streamlining by auctioning the estimated $13-million contents of Albemarle House. On June 8 and 9, according to an auction house official, Sotheby’s will hold an on-site auction at the 300-acre property in southern Albemarle County in an effort to unload an estimated $13.5 million worth of decorative objects, Georgian furniture, and paintings.

“Let me assure you,” says Murray, “that both the [Vineyard Estates] project and Kluge are here to stay.

–with additional reporting by Lisa Provence

Updated February 22 with the Albemarle House price reduction.
Updated 3:49pm, February 23 with scads of additional infomation
Original headline: "Default alleged: Kluge spec house under foreclosure"